In a Joint Venture, Governance Matters More Than the Split

Most joint venture negotiations spend their energy on the equity split, which is the one term both sides understand immediately. It is also the term least likely to cause the venture to fail.

The provisions that decide whether a joint venture survives are the ones nobody wants to discuss while relations are good. What requires unanimous consent. What happens when the partners disagree and neither can proceed. Who funds the next round, and what happens to the party who cannot. How either side exits, at what valuation, and on whose timetable.

These are inexpensive to negotiate at the start, when both parties are optimistic and neither has a specific advantage to defend. They are extremely expensive to negotiate later, because by then the disagreement that makes them necessary has already happened.

A well-drafted joint venture agreement reads like pessimism. It is closer to insurance.